Michael Vaughan described himself as "gutted but proud" last night after England lost agonizingly to Sri Lanka by two runs to leave their participation in the World Cup in the balance.

The result means England remain in fifth place in the Super Eights table going into Sunday's clash against Australia, where another defeat would leave them needing to win their final three games to stand any chance of qualifying for the semi-finals, and Vaughan singled out the middle-order collapse of four for 32 in 49 balls as the turning-point of the match.

"At 100 for two after 25 overs, we were cruising it," he said. "But we didn't get a guy to go on and make 80 or 100, like we've been talking about and that probably cost us in the end.

"We're gutted to have lost but proud of the way we performed. Not many people gave us much of a chance, but I thought we bowled and fielded outstandingly and Ravi Bopara's innings was a real gem. For him to hold his nerve was superb. I think we've found a cricketer for the future."

England and West Indies are now the only teams among the big six left in the competition not to have won a Super Eights match against a Test-playing nation, but Vaughan insisted his team could still reach the last four, claiming in time-honoured tradition that there were plenty of "positives" to take into Sunday's crucial match here against the world champions.

"To restrict Sri Lanka to 235 on a wicket that is similar to what they play on back home was a great effort," he said. "But we then lost a couple of wickets early on and then three big ones in that third power play. The way Ravi and Paul Nixon played, I thought we were going to get over the line but it wasn't to be."

He might have been doing his best to put a brave face on things, but Vaughan will know his side blew a gift-wrapped opportunity to beat a team who began the match with a huge psychological advantage after they whitewashed England 5-0 last summer and who were in desperate need of the two points themselves. Victory here and England would have been on course for the last four.

The loss of Ian Bell, run out by Sanath Jayasuriya's deflection at the non-striker's end was unfortunate, but to lose the middle-order engine room of Kevin Pietersen, Paul Collingwood and Andrew Flintoff in 16 balls smacked of more than carelessness.

Bopara, who needed to hit Dilhara Fernando's last ball of the match for three to take England to a victory which, at 133 for six, seemed beyond them, said he was not even thinking about going for a tie. "If you go for a tie, you might lose," said the 21-year-old Essex all-rounder. "If you go for a win, you might tie." In the end, England managed neither, much to the relief of the Sri Lanka captain Mahela Jayawardene.

"I thought Mali [Lasith Malinga] bowled a brilliant 49th over," he said, referring to a stage of the match when England needed 19 runs off 12 balls. "But I don't want to play this kind of cricket any more." Offer Vaughan a close finish against the Australians at the weekend and he would probably bite your hand off.